"It will extend our storage [chip] portfolio into consumer, mobile devices and the desktop space," said Phil Brace, senior vice president of corporate planning and marketing at LSI. "Agere makes silicon for small drives," he said. The companies have a common customer in Seagate, while Agere's largest customer is Samsung, for mobile chips. "The combined company will have $2 billion in storage-related revenue," Brace claimed.

The new company, to be called LSI Logic Corp., had revenue of $3.5 billion for the 12 months that ended Sept. 30, 2006, and will have a workforce of approximately 9,100 employees, along with a patent portfolio of more than 10,000 issued and pending U.S. patents.

The companies said they expect to generate cost savings reaching at least $125 million in 2008 from increased efficiencies in manufacturing and operating expenses.

LSI president and CEO Abhi Talwalkar will serve as president and chief executive of the new company, which will be headquartered in Milpitas, Calif. and will maintain a significant presence in Allentown, Pa.

Upon close of the deal, LSI will issue 379 million shares on a diluted basis. LSI also said it planned a $500 million stock repurchase program.

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